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Information Spectrum, Inc. v. Hartford

November 10, 2003

INFORMATION SPECTRUM, INC., PLAINTIFF-RESPONDENT,
v.
THE HARTFORD, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-00-1934-01.

Before Judges Skillman, Coburn and Fisher.

The opinion of the court was delivered by: Fisher, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 9, 2003

We have previously considered an insurer's duty to defend claims brought against an insured for"advertising injuries." Tradesoft Tech., Inc. v. Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137 (App. Div. 2000); FileNet Corp. v. Chubb Corp., 324 N.J. Super. 419 (App. Div. 1999), affirming o.b., 324 N.J. Super. 476 (Law Div. 1997). FileNet held that a patent infringement claim is not covered by an advertising injury endorsement, 324 N.J. Super. at 499-500, and Tradesoft emphasized the importance of a claim that, in the language of the policy, the"offense" was committed in the"course of advertising" to trigger coverage, 329 N.J. Super. at 152.

In this case, we conclude that a"reverse passing off" claim, in violation of the Lanham Act (15 U.S.C.A. §1125(a)), is not an offense covered by an advertising injury endorsement. We also conclude that because the insured was not accused of offending conduct occurring"in the course of advertising [the insured's] goods, products or services," the duty to defend did not attach to any of the intellectual property claims asserted against the insured.

Accordingly, we reverse the summary judgment entered in favor of the insured and remand for the entry of summary judgment dismissing the complaint.

I.

Plaintiff Information Spectrum, Inc. (the insured) claims that defendant Hartford Casualty Insurance Company (the insurer)*fn1 was obligated to defend a claim asserted against the insured in the United States District Court for the District of New Jersey (the federal action) by Facstore, Inc. (Facstore).

Prior to the commencement of the federal action, Facstore had written to the insured, contending the insured had misappropriated its product. Rather than await Facstore's formal complaint, the insured commenced the federal action seeking a judgment declaring it had not infringed any of Facstore's property rights. Facstore answered the complaint and also asserted a counterclaim. It is this counterclaim which constitutes the claim against the insured for which it seeks coverage, in the present action, from the insurer.

As a general matter, an insurer's duty to defend is ascertained through a comparison of the policy and the claim asserted against the insured. The duty to defend, thus,"comes into being when the complaint states a claim constituting a risk insured against." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992). The application of this test does not normally require resort to the evidential foundation of the claims asserted against the insured because the duty to defend will be triggered even by a"groundless, false or fraudulent" claim, Danek v. Hommer, 28 N.J. Super. 68, 76 (App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954), or a claim which is"poorly developed and almost sure to fail," Voorhees, supra, 128 N.J. at 174. The test is whether the claimant's pleading constitutes a risk insured against which, in most cases, requires only the comparison of the claimant's pleading and the policy in question. Accordingly, we view the propriety of the summary judgment entered in favor of the insured, and the denial of the insurer's motion, through an examination of Facstore's counterclaim as superimposed upon the policy in question.

II.

According to Facstore's counterclaim, the insured's business included providing technical consulting and training to law enforcement agencies in New Jersey. In November 1994, the insured approached Facstore to discuss Facstore's computerized police reporting system. The insured was interested in expanding its business and felt that a marriage of its consulting expertise with Facstore's product would prove beneficial to both. Facstore alleged that its incentive in forming such a venture was the insured's claim of having a national sales force, which would allow for the marketing of Facstore's software system on a national, and not just a statewide, basis.

On September 22, 1995, Facstore and the insured entered into a software marketing agreement which provided the insured with the exclusive right to demonstrate, market and license Facstore's software system. The agreement contained confidentiality provisions designed to keep secret Facstore's proprietary information. By November 1995, Facstore had developed a working computer-assisted dispatch and records system ...


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